Dave Schaeffer, CEO of Cogent Communications, is known for his straightforward approach. His recent earnings call, however, may have revealed something more intriguing than just direct answers: a potential goldmine of dark fiber.

During the call, Schaeffer casually mentioned Cogent's "substantial footprint of dark fiber," dormant fiber optic cables not currently used for data transmission. He explained that Cogent hasn't been selling it, not due to any strategic decision, but because the team responsible for provisioning this dark fiber has been busy with the wave network reconfiguration, a major project following the Sprint acquisition.

Why Dark Fiber Matters

Dark fiber is a highly sought-after asset in the telecom industry. It's a pre-built infrastructure ready for data transmission, eliminating the costly and time-consuming process of laying new cables. As demand for data explodes with 5G, AI, and IoT, owning a vast network of dark fiber is like striking gold.

Cogent's Potential Disruption

Known for its aggressive pricing in the bandwidth market, Cogent could disrupt the dark fiber landscape. Operating the world's most interconnected network, directly connected to over 8,000 networks, Cogent is poised to undercut competitors and capture a significant market share by offering dark fiber at competitive prices.

Estimating the Value

Cogent acquired a vast amount of fiber from Sprint: 18,905 route miles of owned intercity fiber and 12,057 route miles of owned metropolitan fiber, plus IRU (indefeasible right of use) fiber. Even a conservative estimate, considering benchmarks like Zayo Group Holdings' $14.3 billion acquisition in 2020, suggests Cogent's dark fiber could be worth hundreds of millions, if not billions, of dollars.

Analyzing the Transcripts

Let's delve into the transcripts to glean further insights into Cogent's potential revenue from dark fiber and its impact on the company's financials.

Revenue Potential by Customer Type

Based on the transcript analysis of customer type revenue, we can anticipate the following potential revenue breakdown:

Customer Type Q4 2023 Revenue Q1 2024 Revenue Potential Dark Fiber Demand

Net-Centric $93.1 million $92 million High

Corporate $126.6 million $124.9 million Medium

Enterprise $52.3 million $49.3 million Medium

Impact on EBITDA

While the exact impact of dark fiber sales on EBITDA is difficult to quantify, it's expected to be significant. This new revenue stream could offset the decline in T-Mobile subsidy payments, contributing to EBITDA growth.

The Sleeping Giant Awakens

Schaeffer's seemingly innocuous comment about dark fiber could be a game-changer. Cogent's dark fiber holdings represent a sleeping giant. As the company shifts its focus to monetizing this asset, we could witness a major shift in the dark fiber market, potentially unlocking substantial value for Cogent and its shareholders.

"Fun Fact: Dave Schaeffer, the founder of Cogent, holds a PhD in Economics from Stanford University. His background in economics is evident in Cogent's business strategies, often leading to disruptive pricing models and highly efficient network operations."